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Issues:
1. Invocation of section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 without proper hearing. 2. Quashing of notice dated 22-12-2003 and direction to consider one-time settlement offer. Analysis: 1. The petitioners, borrowers from Punjab National Bank, defaulted on payments leading to classification as "non-performing assets" per RBI guidelines. The bank invoked the guarantee, demanding outstanding dues with interest. The petitioners challenged the notice under Article 226, alleging lack of proper hearing as required by section 13 of the Act. 2. The Supreme Court in Mardia Chemicals Ltd. v. Union of India addressed the constitutionality of section 13 and the mechanism for borrower objections. The Court upheld section 13(2) as valid, emphasizing the need for borrower input before recovery actions. The RBI's guidelines on asset classification were highlighted, emphasizing the non-performing asset criteria. 3. The Court stressed the necessity of a 60-day notice before taking measures under section 13(4) and the obligation to consider borrower objections. In this case, the petitioners were not given a hearing or opportunity to present facts, violating section 13(2) requirements. 4. Consequently, the Court allowed the petitions, quashing the notice and directing the bank to serve a 60-day notice before any enforcement actions. The bank must consider objections raised by the borrowers, communicating reasons for rejection without granting a right to approach the Debt Recovery Tribunal at that stage. 5. The Court clarified that the absence of a one-time settlement agreement on record didn't preclude the parties from reaching such an agreement. The petitions were disposed of without costs, ensuring compliance with due process under the Act.
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